What characterizes an inverted tariff in the context of FTZs?
Understand the Problem
The question is asking about the concept of inverted tariffs within Free Trade Zones (FTZs) specifically, seeking to identify the correct characterization among the provided options. This requires comprehension of trade policies and tariff structures.
Answer
Inverted tariff: higher tariffs on inputs than finished goods in FTZs.
An inverted tariff in the context of FTZs occurs when the tariff on imported inputs is higher than the tariff on corresponding finished goods imported for U.S. consumption.
Answer for screen readers
An inverted tariff in the context of FTZs occurs when the tariff on imported inputs is higher than the tariff on corresponding finished goods imported for U.S. consumption.
More Information
Inverted tariffs allow manufacturers using Foreign-Trade Zones to reduce costs by importing inputs with higher tariffs and exporting or selling finished products with lower tariffs, thereby optimizing production costs.
Sources
- USITC - Research and Analysis - usitc.gov
- U.S. Foreign-Trade Zones: Background and Issues for Congress - crsreports.congress.gov
- Foreign-trade zones of the United States - Wikipedia - en.wikipedia.org
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